Save Time and Increase Profits with Fulfillment By Amazon

By: Chris Green, CEO FBA Power

1. FBA (Fulfillment By Amazon) Explained

If you sell online, then you have likely already heard of Amazon’s
fulfillment program called FBA. If you haven’t heard of FBA, well then the
cat’s out of the bag now. Sellers have been leveraging FBA program for
several years and the sellers who have embraced this new service and taken
advantages of its capabilities have enjoyed a nice margin and truly
transformed their businesses. Entering its’ fourth year, FBA stands for
Fulfillment By Amazon and it is Amazon’s version of a fulfillment company.
Now fulfillment companies have been around for a long time providing storage
and shipping services for their clients’ products, but what makes FBA
different is that Amazon is also the marketplace for those items so they have
an active interest in seeing the items sell. Additionally, FBA items are
eligible for Amazon’s shipping promotions including Free Super Saver Shipping
and Amazon Prime. This is what makes FBA incredibly powerful.

Even if you don’t currently use FBA and even if you don’t ever want to use
FBA, it is important to understand how FBA works and how your competition is
using FBA in their business.

2. The Triple Win

FBA can be described as a Triple Win.

Win #1. Higher prices, higher margins, higher payouts

Since items sold through FBA are eligible for Free Super Saver Shipping
and Amazon Prime, FBA sellers actually raise their prices to match their
competitor’s total price (price+shipping). So even with the addition of FBA
fees, the FBA seller still receives a higher net payout from their Amazon
sale because of the higher sales price. For example, a seller who ships their
own orders who sells an item for $20 with $5 shipping will show the same as
an FBA seller selling the exact same item for $25. Actually, the FBA seller
will show first because FBA is the tie breaker.

Win #2. Less work

FBA sellers sell items 24 hours a day. 7 days a week. Items ship all hours
of the day or night including weekends. They ship whether the seller is at
home or on vacation. Once an FBA seller prepares their items for the FBA
warehouse and sends them to Amazon, they don’t have to do anything else. They
can monitor inventory levels and adjust prices as needed from anywhere with
an internet connection. They don’t have to stock boxes, envelopes, packing
materials, or shipping labels anymore. They also don’t wait around for their
UPS driver or go to the post office every day.

Win #3. Happier Customers

It is estimated that 40-50% of Amazon buyers have never bought from a
third party merchant. Amazon customers want to buy from FBA sellers. They
trust Amazon and they know that their items will ship quickly and if there is
ever a problem, Amazon will help (including an extended return policy). When
your items are shipped through FBA (either for Amazon orders or Basic
Fulfillment orders) they will attract these types of Amazon buyers who are
willing to pay more to get their items shipped by Amazon. This is an
important point to grasp: Amazon customers are willing to pay more for the
exact same item if it comes from Amazon or an FBA seller. They do this
because they know they will get their item fast and that customer service
will be top notch.

3. Scalability Helps Small Sellers

The competitive advantages that the big sellers have enjoyed for years
have vanished overnight with the introduction of FBA. A new seller on Amazon
may make some good money by selling items out of their garage in their spare
time, but if they wanted to make a real income they would have to scale up
and get more space to handle more inventory and hire employees to help with
all of the orders. Now they may make more money but they have additional
overhead. There are two things that have kept small sellers small and those
are space and time limitations.

As a small seller, you only have so much space in which to store products
and you only have so much time to list, sell, and ship your orders. Ten
orders a day can be fun. Twenty may get you excited. But can you fulfill 300
orders in a day? --Day after day? And shut down your entire business if you
ever wanted to go on vacation?

With FBA, you can grow as big as you want. FBA removes the space and time
limitations and allows you to compete on the same playing field as the big,
established sellers on day one. There are no scalability restrictions with
FBA. If you have access to products, you could sign up with FBA and ship them
fifty thousand products in one day and be selling 500 items a day within the
week. Manage your inventory properly and you could run an FBA empire from a
studio apartment.

4. How Amazon Describes FBA

Amazon describes FBA this way:

With this innovative service, you send inventory directly to Amazon where
it is stored and managed in a secure, climate-controlled facility. When
orders are received, Amazon will professionally pick, pack and ship the
product directly to your customer.

Amazon.com processes millions of orders a year while consistently ranking
as one of the most trusted and highest customer satisfaction rated e-commerce
companies. To maintain this unique combination, we have developed one of the
most advanced online order processing and fulfillment operations in the
world. From the advanced web-to-warehouse, high-speed picking and sorting
system to our complete shipping carrier integration, Amazon's technology
results in your customers getting what they ordered, when they ordered it.

Whether you're considering just a few items and shipments a week or
millions of products and orders per year, you can put Amazon's expertise and
experience to work for your business with Fulfillment by Amazon.

Put Amazon's Fulfillment Technology to Work for You.

You sell it, we ship it. Amazon has created one of the most advanced
fulfillment networks in the world, and your business can now benefit from our
expertise. With Fulfillment by Amazon (FBA) you store your products in
Amazon's fulfillment centers, and we directly pack, ship, and provide
customer service for these products.

Your FBA listings on Amazon.com are sorted by the item price without a
shipping cost. Amazon assumes they will ship for free with FREE Super
Saver Shipping or Prime, which gives you an edge when competing!

Trusted Customer Service and Returns:

FBA listings are displayed with the "Fulfillment by Amazon" logo, so
customers know that packing, delivery, customer service and returns are
all handled by Amazon.

Fulfill Orders from other Channels:

FBA can fulfill your orders from other sales channels from your
inventory stored at an Amazon fulfillment center. You manage your
inventory through a simple online user interface, and can direct us to
return the inventory in our fulfillment centers at any time.

5. FBA Fees

There are fees that are associated with FBA. These fees include:

Inbound Shipping Fee

This is the cost of getting your items to the FBA warehouse. Amazon lets
you use UPS partnered shipping so you get Amazon UPS rates which you can
probably imagine are the best in the world. A 50 pound box typically ships
for around $9-$15 depending on how close you are to your nearest fulfillment
center. You can also arrange LTL shipments or choose your own shipper.

Amazon Commission

The varies depending on the categories that you sell in.

Handling Fee (for non-media items) – See chart

Pick & Pack Fee – See chart

Weight Based Fee – See chart

Storage Fee

Storage fees are very low and the first 30 days are free. You can manage
your FBA inventory levels and replenish your inventory as needed to keep 30
days worth of sales in stock to prevent paying any FBA storage fees. Even if
you do end up paying storage fees, you’ll find that they are very reasonable.

There are additional fees associate with FBA, but you will also sell your
items for a higher price so in most cases you will actually receive a higher
net payout per transaction even though you have additional transaction fees.
This would seem impossible considering the fact that by using FBA you are
also doing less work and a keeping your customers happier by providing faster
shipping services than you could provide yourself.

8. Downside to FBA

Even with all the positive things that FBA allows sellers to do, there are
some things to keep in mind when deciding if you are going to send all or
some of your inventory to an FBA warehouse.

Return Policy

Amazon handles customer service for all FBA orders. Amazon is very
conscientious about keeping their customers happy. They will allow a customer
to return an item for any reason. This opens the door for abuse sometimes and
there are instances where a customer takes advantage of this policy at the
expense of your inventory.

If you find that you are receiving a higher rate of return on an item that
is affecting your target margins, you will have to evaluate the item
compatibility with FBA. You can raise your price to compensate or you can try
to sell the item on other channels and ship your orders from your FBA
inventory using Basic Fulfillment. You may even decide that the product is no
longer a good match for FBA and you can request that Amazon return the
products to you.

International Orders

Currently, Amazon will ship your books and media items internationally for
you at no extra charge (customer pays shipping). If you sell items from other
categories on Amazon, they will not be eligible for international shipping
(through Amazon direct sales or Basic Fulfillment). I would expect that
Amazon will offer this service in the future.

Amazon as a Competitor

When selling on Amazon using FBA, you may enjoy a time of being the only
FBA seller for an item. This is an ideal situation but it doesn’t always
last. Other sellers can list their FBA inventory and start to drive the price
down. Sometimes you may be selling an item that Amazon does not currently
carry and have a type of exclusivity. In the event that Amazon starts to
carry these products directly, they may be able to sell them at lower margins
that you are comfortable with. In cases like this, you can try to sell your
items on other channels and use Basic Fulfillment until you are out of
inventory, or even request to have your inventory removed. Then re-evaluate
the item considering your costs and profit margin goals.

Unfulfillable Inventory

If a customer returns an item, Amazon will determine if the item can be
resold or not. If it can be resold, it will be added to your existing FBA
inventory. If not, it will be marked as ‘unfulfillable’ and you will have to
request that it be returned to you or destroyed. Best Practice is to remove
your entire unfulfillable inventory once a month or so. You may find that
items were damaged or that there was nothing wrong with your items. Just
reprocess them to your FBA account if they are still in sellable condition.

Lost/Missing/Damaged Inventory

Occasionally you may find that some of your inventory is missing.
Sometimes they do lose it, and sometimes it just takes a long time to receive
it. If Amazon loses or damages your inventory, they will compensate you for
the items.

9. FBA Vendor Feature: FBAPower

As more and more sellers begin to utilize FBA for all or part of their
business, third party providers will surely enter the market with dedicated
FBA applications. One of the first of these companies to provide sellers with
a one-stop FBA solution is FBAPower. They provide direct FBA listing as well
as re-pricing and mobile price scanning. Originally designed to process and
submit books and media items efficiently to FBA, they have recently added the
ability to replenish inventory, upload and batch convert merchant fulfilled
listings into FBA listings, and create original listings from within the
FBAPower program.

FBAPower also offer a mobile scouting tool that allows users to quickly
see all of the competitive pricing information for any product in the Amazon
catalog. Billed as ‘The Ultimate Arbitrage Tool’, the scout allows the user
to easily identify any item that represents an opportunity for profit on
Amazon.

FBAPower Program
One-touch inventory processing (in under 30 seconds).
Enter an item, select condition, select price, add custom condition notes,
print and affix FBA label, place in box for shipping.
Web-based for ease of use and maximum compatibility.
FBAPower can be run on multiple terminals allowing large sellers to work on
multiple shipments at the same time.

Fulfillment Center Identification
Fulfillment centers are identified as you process items so that you can
divide your items as you go.

Bulk Inventory Upload and FBA Conversion
Users can upload their existing Amazon inventory and convert to FBA in bulk.

Instant and Individual FBA Label Printing

FBA labels are printed on demand as items are processed for shipping to
Amazon.
Reduces the number of times an item is 'touched' during processing.
Reduces the possibility of items being mislabeled.

Pricing Data Provided

5 lowest offers in New Condition.
5 lowest offers in Used Condition (with condition noted).
All FBA seller offers.
Amazon offer (if sold by Amazon).
Amazon sales rank displayed
Total number of marketplace offers
Prices formatted as FBA net (price + shipping) for books and media items.
FBA sellers can easily see what they are competing against.
Color coded for easy reading.
Total pricing picture allows sellers to price their items competitively; even
when the marketplace becomes inefficient (all used offers higher than new
offers due to automated re-pricing programs that don't work well combined
with listing programs that only compare 'like-condition' prices).

Built-in Error Catching

When multiple results are returned for UPC or ISBN searches, FBAPower will
alert the user to verify the item that the user wants to list. Incorrect
items can be deleted. Eliminates the possibility of sending mismatched items
to FBA. Catches CD vs DVD, Import vs. Domestic, DVD vs. VHS, DVD vs. Blu-Ray
and more. Example below.

The Scout can be paired with a Bluetooth laser barcode scanner for fast and
accurate data entry. Alternately the camera can be used to capture UPC codes,
or they can be entered by voice command or by manual touchpad. Once a UPC,
ISBN, or ASIN is entered, the scout returns the Amazon product title, image,
sales rank, 5 lowest new offers, 5 lowest used offers (with conditions
noted), 5 lowest FBA seller offers, and the Amazon price (if available).
These prices are formatted as what FBAPower calls ‘FBA NET’ meaning that the
price displayed is the sales price + shipping. This allows the FBA seller to
quickly see what they are competing against since their items will be listed
with FBA and eligible for free shipping.

A New Era of Mobile Scouting.

Runs on
Android OS (iPhone next). Android on all major US carriers.

The Ultimate Arbitrage Tool - identifies any market opportunity for
any item in the Amazon catalog.

Live, accurate pricing data.

No database of prices to download or maintain.

Integrated with FBAPower - save items that you buy for easy upload to FBAPower program. No need to scan everything twice.

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